The Pros and Cons of Selling to Customers on Credit
The moment you start selling on credit, your sales become a mix of cash and credit. Some customers would prefer to pay cash while others would like to buy on credit. Selling on credit is a significant yet unavoidable part of every business. whether it be a small or large business, some factors will always push you into selling on credit/Udhaar.
There could be multiple reasons why it becomes necessary to sell on credit. For instance, you may want to build a relationship with the customers, you may want to work on customer loyalty or retention or it may be a result of a competitive environment.
When you see your competitors offering credit purchase, it becomes even more difficult to decide whether to offer credit or not. Well, certainly you are left with no choice because of the possible threat of losing customers to rivals.
Selling on credit is a habit – good or bad, that’s for you to decide – you get stuck with the moment you make the first credit transaction. Therefore, before you finalize your decision to sell on credit, you must dig deep into your decision and your future outcomes.
You may have to check loyalty or trustworthiness of the customers you are dealing with and for that the basic requirement is the background check on their credit history. It’s easier for big brands since they already have the data required. On the other hand, small businesses may rely on their gut feeling or past experiences.
Are Credit Purchases Right for Your Business?
Here are some pros and cons to help you decide.
Pros of Offering Udhaar
Gain More Customers
With more than one payment option, more customers will be able to buy from you. And, many customers prefer credit. You invite a whole new market of customers by allowing Udhaar. Offering an easy payment solution encourages customers to return to your business.
Get People Talking
Introducing something that benefits customers will always spread a positive word. If you decide to accept credit payments, spread the word and don’t be shy. Let your current and prospective customers know about your new plans.
Encourage Bulk Purchases
You are more likely to sell expensive products if you accept credit purchases. Selling large items becomes much easier if you allow customers to pay you later.
Portrays Business Stability
Providing convenient payment options to customers makes your business appear more legitimate and established. Unlike a new, unproven business that is not financially stable to offer credit.
Stand Up Against Competition
Selling on credit to customers gives you the competitive edge you need, not all businesses are capable to do that. Offer credit to give your customers and give a signal to your competitors that you’re growing.
Cons of Offering Udhaar
The biggest risk comes from giving credit to people who don’t return the favor. There are many customers who will pay on time, but there are also some who will always be late.
Diligent With Records
Your accounting will play a significant role when offering credit to customers. You’ll need to create seperate accounts for each customer who buys from you. And, you need to track the numbers well, how long each customer takes to repay, how often they purchase on credit, and more.
Slow cash flow
You don’t have quick access to cash when you sell on credit. Instead, you have more products going out than money coming in. A stagnant cash flow will impact your ability to pay bills, especially when customers repay late.
A Simple Solution
All the cons you studied can be overcome and tamed with the help of a simple mobile application for credit management. For example, Udhaar App.
Udhaar app is a simple, free, and reliable platform to manage all your credit problems. Nothing to worry about if you have already started selling on credit. It’s very easy to use. Once you create a customer account and add an entry, Udhaar app will send an automated text to your customer informing them of outstanding balance. You can use it in different languages, prepare customer reports for week, day or months, send them reminders and what not.
Should you offer credit to customers?
Overall, the final decision about offering credit to customers should be yours. Remember, you don’t have to sell on credit to everyone. Many stores keep credit checks using the Udhaar/Khata app and only offer credit to customers who have proven they can make payments on time.